Are employee benefit payments tax deductible?
The General Department of Taxation - Ministry of Finance has just answered questions for businesses about deductible and non-deductible expenses when determining taxable income.
Article 4 of Circular No. 96/2015/TT-BTC dated June 22, 2015 of the Ministry of Finance guiding on corporate income tax (CIT) amends and supplements Article 6 of Circular No. 78/2014/TT-BTC dated June 18, 2014 of the Ministry of Finance stipulates deductible and non-deductible expenses when determining taxable income as follows:
"1. Except for the non-deductible expenses specified in Clause 2 of this Article, enterprises are allowed to deduct all expenses that meet the following conditions:
a) Actual expenses incurred related to the production and business activities of the enterprise.
b) Expenditures have sufficient legal invoices and documents as prescribed by law.
c) Expenses if there is an invoice for purchasing goods or services each time with a value of 20 million VND or more (price including VAT) when paying must have a non-cash payment document.
Non-cash payment documents are made in accordance with the provisions of legal documents on VAT...
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2. Expenses that are not deductible when determining taxable income include: ...
2.6. Paying salaries, wages, and bonuses to employees in one of the following cases:
a) Paying salaries, wages and other payable amounts to employees that the enterprise has accounted for in production and business costs during the period but has not actually paid or does not have payment documents as prescribed by law.
b) Salaries, bonuses, and life insurance expenses for employees that do not specifically state the conditions and levels of benefits in one of the following documents: Labor contract; Collective labor agreement; Financial regulations of the Company, Corporation, Group; Bonus regulations prescribed by the Chairman of the Board of Directors, General Director, Director according to the financial regulations of the Company, Corporation, etc.
2.30. Expenses that do not correspond to taxable revenue, except for the following expenses:
- Welfare expenses directly paid to employees such as: Funeral and wedding expenses of the employee and his/her family; vacation expenses, treatment support expenses, expenses to support additional knowledge and study at training facilities; expenses to support employees' families affected by natural disasters, war, accidents, and illness; expenses to reward employees' children with good academic achievements; expenses to support travel expenses on holidays and Tet for employees; expenses for accident insurance, health insurance, and other voluntary insurance for employees (except for expenses to buy life insurance for employees as guided in Point 2.6, voluntary retirement insurance for employees as guided in Point 2.11 of this Article) and other welfare expenses. The total amount of welfare expenses mentioned above shall not exceed 1 month's average actual salary in the tax year of the enterprise.
The determination of 01 month's actual average salary implemented during the tax year of the enterprise is determined by dividing the salary fund implemented during the year by (:) 12 months. In case the enterprise has not operated for 12 months: The determination of 01 month's actual average salary implemented during the tax year is determined by dividing the salary fund implemented during the year by (:) the actual number of months of operation during the year.
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The implemented salary fund is the total amount of actual salary paid in that settlement year up to the final deadline for submitting the settlement dossier as prescribed (not including the amount of salary reserve fund deduction of the previous year spent in the tax settlement year).
Based on the above provisions, if an enterprise incurs welfare expenses directly paid to employees, if it meets the conditions specified in Article 4 of Circular No. 96/2015/TT-BTC mentioned above, has full payment documents as prescribed, the expense level is in accordance with the regulations and rules of the enterprise and the total expense does not exceed 1 month's average actual salary made during the tax year, it can be included in deductible expenses when determining taxable income of the period.
